Dollar General Q2 Results Top Estimates, Raises Guidance

American variety-store chain Dollar General (DG) reported Q2 results on August 26. Revenue and earnings came in above consensus estimates but were lower compared to the same quarter last year.

Net sales declined 0.4% year-over-year to $8.7 billion but surpassed the consensus estimate of $8.56 billion. Same-store sales were down 4.7% year-over-year due to reduced customer traffic, which also affected total sales.

Dollar General reported EPS of $2.69, a 13.8% decrease year-over-year, but topped the consensus estimate of $2.55 a share. (See Dollar General stock charts on TipRanks)

In the second quarter, Dollar General repurchased $700 million worth of common stock. Additionally, the board of directors has announced a $0.42 per share quarterly cash dividend, payable on or before October 19, 2021, to shareholders of record as of October 5.

Dollar General CEO Todd Vasos said, “We feel very good about the underlying strength of the business, and we are excited about our plans for the second half of fiscal 2021.”

However, Vasos warned of a challenging operating environment owing to uncertainties triggered by the pandemic.

Following the results, for the full year, Dollar General now expects sales to grow between 0.5% and 1.5% compared to the previous guidance of a 1.0% decline to an increase of 1.0%. Diluted EPS is expected to be in the band of $9.60 – $10.20, up from the initial guidance of $9.50 to $10.20.

Following the quarterly results, Piper Sandler analyst Peter Keith reiterated a Buy rating on the stock and raised the price target to $250 from $230, implying 10.67% upside potential to current levels.

Consensus among analysts is a Strong Buy based on 8 Buys and 1 Hold. The average Dollar General price target of $248 implies 9.78% upside potential to current levels.

Additionally, DG scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.